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Latest U.S. Free Trade Agreement Contains New Twist

The previous free trade agreements (FTAs) have been particularly troubling for Internet communications since they have required trading partners to treat all temporary reproductions of images and sound files in computer memory as copyright-infringing, but have not exported the fair use limitation of U.S. copyright law: a limitation that provides important balance within the U.S. system, as well as room for the American technology industry to innovate. As the Ninth Circuit recently affirmed in the Perfect10 v. Google decision, under U.S. law temporary copies necessary to enable end-user use of Internet technologies (such as search engines) are highly transformative, and thus non-infringing fair use. Given that, the FTAs appeared to require trading partners to adopt copyright laws that are inconsistent with, and more stringent than, current U.S. law. (Curiously, the Korean FTA contains a new feature that might go some of the way to addressing this problem. Footnote 11 to Article 18.4(1) might allow room for both countries to adopt or maintain limitations or exceptions for fair use subject to the so-called Three Step Test. For the sake of Korean ISPs, search engines and Internet innovators, let's hope this important clarification is implemented in a meaningful way in Korea's national law).

The side letter's second objective of regularly assessing and actively seeking to reduce the impact of technological means of committing copyright infringement is also dangerously broad. Does it, for instance, require the countries to force ISPs to pro-actively monitor and filter network transmissions for potential copyright infringement—something U.S. ISPs have steadfastly resisted as a matter of principle since the early days of the Internet? That would also be inconsistent with current U.S. copyright law. As the Ninth Circuit recently confirmed in its Perfect10 v. CCBill decision, U.S. ISPs do not have an affirmative duty to police their users for evidence of repeat infringement in order to get the benefit of the U.S. safe harbor regime.

However, even more disturbing than the open-ended objectives are the very specific unilateral obligations given by Korea to the U.S. government in the following paragraphs of the side letter. Korea agrees to work with the private sector, the U.S. government and other foreign authorities to "prevent, investigate, and prosecute Internet piracy"; to issue a policy directive within 6 months establishing clear jurisdiction for effective enforcement against online piracy pursuant to a division or joint investigation team that will investigate and take criminal action for online piracy, at the request of a rightsholder. Korea agrees on the objective of shutting down websites that permit unauthorized downloading including in particular, "webhard," and peer to peer services. And Korea has also been asked to adopt and provide criminal sanctions to enforce the U.S. secondary copyright liability standard of inducement. Korea agrees to prosecute individuals and companies that profit from developing and maintaining services that effectively induce infringement.

Aside from the appropriateness of asking trading partners to adopt such specific enforcement obligations in a free trade agreement, the side letter also raises two other concerns. First, how does it fit with the online service provider (OSP) safe harbor regime contained in Article 18.10 (30) of the FTA? Second, does it endanger the end-to-end architecture of the Internet?

U.S. copyright law provides statutory safe harbors for four common OSP activities: transitory digital communications, caching, web hosting and provision of information location tools, such as hypertext link-based search engines. There are sound policy reasons for doing so. Safe harbors set out the areas where OSPs can operate without fear of a crippling lawsuits arising out of their own, or their end users' behavior, providing important legal certainty, and allowing OSPs to manage otherwise unpredictable business risk, thus spurring investment in the development of technology. This, in turn, facilitates access to knowledge and increased online freedom of expression for the world's citizens. The four safe harbors, contained in section 512 of the U.S. copyright statute, have also been incorporated in the Korea FTA and in the last nine bilateral FTAs.

U.S. copyright law also imposes limitations on the type of injunctions that courts can grant against OSPs that quality for the safe harbors. For OSPs who host content, cache or provide location tools and have control over information residing on their networks, courts can order the ISP to terminate a particular subscriber, block access to a particular online site on the OSP?s system or network, and issue any other injunctive relief the court considers necessary to prevent or restrain infringement, so long as it's the least burdensome option for the OSP. For OSPs that provide connectivity and act as mere conduits, U.S. courts can order the OSP to terminate a particular subscriber, or require an ISP to block access to a particular online location outside of the U.S. No US court has ever required the four major U.S. Internet backbone providers to block access to a foreign country's website for alleged copyright infringement.

This last remedy has the potential to erode the end-to-end nature of the Internet. The one case filed by U.S. copyright owners (and subsequently not pursued) that sought that outcome, RIAA v. Listen4Ever.com, was hotly debated at the time precisely because this would amount to private rightsholders using one country's national copyright law and judicial apparatus to cut off access to another part of the Internet.

Since U.S. law already provides for injunctions to block specified online locations outside of the U.S., does the Korea FTA pose any greater threat to the Internet's core architecture? It's not clear. It depends what the threshold is for "shutting down websites." In U.S. law, a court could only require an ISP that is a mere conduit to block access to a foreign website if a copyright owner has successfully proven a case of infringement. By comparison, U.S. law allows for only temporary takedown of a website on an allegation of copyright infringement. The Korea FTA side letter is silent as to whether a website would need to be "shut down" only after determination of a lawsuit or on the much lower standard of mere allegation of copyright infringement.

The latter would be the worst of all possible worlds: sacrificing the free flow of information on the Internet on the unproven allegation that a website permits unauthorized downloading of copyrighted works. The Korea FTA's language raises more questions than answers.

For the Internet community, the most troubling part of all this is that there will be no opportunity for a public debate on the policy implications of creating this world. That's because the Korean FTA was negotiated using the USTR's Fast Track authority under the Trade Promotion Act, which only allows the U.S. Congress to vote to accept or reject the free trade agreement in its entirety. The USTR's Fast Track authority will expire at the end of June this year, unless renewed by Congress. Whether the Korea FTA side language will become a standard part of the USTR's template free trade agreement in the future depends on that renewal—something that seems more likely after a recent Bipartisan Deal on environment, labor, and patent enforcement standards.

Let's hope Washington DC policy-makers pay attention to the impact of the free trade agreements' IP provisions on Internet innovation when they make that decision.